Company returns to profitability on strong revenue performance
OTTAWA, May 11 /CNW Telbec/ - Allen-Vanguard Corporation (TSX:VRS) of
Ottawa, Canada today reported its financial results for the second quarter of
fiscal year 2006 ended March 31, 2006. All financial information is in
Canadian dollars.
Revenue for the second quarter was $13.4 million and EBITDA(1) was
$1.1 million. Net earnings were $0.2 million, or $0.01 per share. These
results are consistent with preliminary figures released on April 25. In the
second quarter of fiscal 2005, revenue was $13.5 million, EBITDA was
$0.1 million and a net loss of $0.7 million or $0.03 per share was recorded.
The Company noted that the revenue and EBITDA performance in the quarter
showed a strong turnaround from the previous two quarters when operating
losses were reported. This reflects a strong contribution from the electronic
counter measures ("ECM") business, which represented a record 53% of sales in
the quarter, together with the initial benefit of cost savings measures
initiated in January 2006. The Company has reduced its annualized selling and
administration costs by approximately $6 million. In addition, the Company
generated free cash flow of $2.2 million in the quarter, which has resulted in
an equivalent reduction in net debt since December 31, 2005.
"We're extremely pleased that our second quarter performance marks a
return to profitability and free cash flow generation, and that we have enough
visibility on the remainder of the year to project stronger operating results
in the third quarter and a net profit for fiscal 2006 overall," said David E.
Luxton, interim President and CEO. "This is before any major potential
contract wins through our business development activity with Lockheed Martin
on ECM programs in the U.S., where important military trials are underway."
For the six month period ended March 31, 2006, revenue was $22.3 million,
compared to $31.0 million in the prior year period. The year to date EBITDA
loss was $0.6 million, and the net loss was $2.3 million or $0.06 per share.
This compares to EBITDA of $3.1 million, and a net loss of $1.4 million or
$0.06 per share in the prior year period.
The Company affirmed that its financial position remains healthy, and
that it was in compliance with all revised bank covenants as of the end of the
quarter. Working capital at the end of the second quarter was $17.7 million.
Cash, net of bank indebtedness, was $2.7 million, up from $1.3 million at the
end of the first quarter.
Financial highlights for the second quarter ("Q2") and six months ("YTD")
ended March 31, 2006:
- Revenue was $13.4 million in Q2 2006 and $22.3 million in YTD 2006,
compared to $13.5 million in Q2 2005 and $31.0 million in YTD 2005. The
contract for equipping and training the Iraqi police force (the "Iraq
Contract") accounted for revenue of $4.3 million and $7.9 million in
Q2 2005 and YTD 2005 respectively. Excluding this contract, Q2 2006
revenue was up 46% compared to the prior year quarter. Revenue from ECM
products represented 53% of Q2 2006 revenue, compared to only 11% in
Q2 2005. Commencing this quarter, the Company is disclosing revenue by
product group in addition to revenue by geographic area in order to
increase the transparency of its financial reporting.
- Gross profit of $5.5 million includes a charge of $1.1 million which
was recorded to eliminate the gross profit up to the net realizable
value of inventory sold from the Iraq Inventory which was accepted in
settlement of the receivable balance outstanding. Excluding this
charge, the underlying gross margin was 49% in Q2 2006, up sharply from
42% in Q2 2005, reflecting the high proportion of higher margin ECM
products in the revenue mix. Reported gross margin which includes this
adjustment was 41% of revenue in both Q2 2006 and YTD 2006, compared to
42% in Q2 2005 and 43% in YTD 2005.
- Selling and administration expenses were $3.4 million in Q2 2006 and
$8.0 million in YTD 2006, compared to $5.0 million in Q2 2005 and
$9.6 million in YTD 2005. Selling and administration expenses were down
$1.2 million on a sequential basis from Q1 2005.
- Earnings before interest, taxes, amortization, stock-based
compensation, foreign exchange, integration costs and goodwill
impairment ("EBITDA") were $1.1 million in Q2 2006 and a loss in YTD
2006 of $0.6 million. These figures compared to EBITDA of $0.1 million
and $3.1 million in Q2 2005 and YTD 2005 respectively.
- Net earnings for Q2 2006 were $0.2 million or $0.01 per share, compared
to a loss of $0.7 million or a loss of $0.03 per share in Q2 2005. Net
loss for YTD 2006 was $2.3 million or a loss of $0.06 per share,
compared to a net loss of $1.4 million or a loss of $0.06 per share in
YTD 2005.
- Allen-Vanguard's cash and cash equivalents, net of bank indebtedness,
at the end of Q2 2006 amounted to $2.7 million, an increase of
$1.4 million from the beginning of the quarter. Working capital totaled
$17.4 million at the end of Q2 2006, a reduction of $0.2 million from
the beginning of the quarter.
- Net Borrowings, defined as bank indebtedness, net of cash, plus long
term debt, totaled $6.7 million at the end of Q2 2006 with a ratio of
debt to debt plus equity of 0.15:1, compared to Net Borrowings of
$6.1 million and a ratio of debt to debt plus equity of 0.14:1 at FY
2005 year-end. Net borrowings declined by $2.2 million in the second
quarter.
Financial Statements and the Management Discussion and Analysis for the
second quarter ended March 31, 2006 will be filed on www.sedar.com on May 11,
2006.
Allen-Vanguard will be hosting an investor and analyst conference call
and webcast at 9:00 am, May 11, 2006. Dial-in numbers: 416-644-3428 or
1-866-250-4909.
Web access http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal
sign)1463880
For those unable to listen to the call live, a replay will be available
for two week period beginning at 11:30 on May 11, 2006. The replay phone
number is 1-877-289-8525 and the access code is 21186882(pound key).
(1) Earnings before interest, taxes, amortization, stock-based
compensation, foreign exchange and integration costs.
About Allen-Vanguard
Allen-Vanguard Corporation and its subsidiaries worldwide operate under
the brand "Allen-Vanguard". The Company develops and markets technologies,
tools and training for defeating and minimizing the effects of hazardous
devices and materials, whether Chemical, Biological, Radiological, Nuclear or
Explosive (CBRNE). The Company's equipment is in service with leading security
and military forces in more than 120 countries. Products include Electronic
Counter-Measures ("ECM") equipment for jamming remote detonation of terrorist
devices, specialty security equipment for Explosive Ordnance Disposal ("EOD"),
remote intervention robots for hazardous applications, vehicle barrier
systems, and personal protective wear for use in dealing with bio-chemical
agents. Allen-Vanguard is the sole, worldwide licensee and/or developer of
patented technologies such as the Universal Containment System and CASCAD Foam
for blast mitigation and decontamination of bio-chemical warfare agents. Head
office operations are located in Ottawa, Ontario, Canada, with manufacturing
operations in Stoney Creek, Ontario; Tewkesbury, U.K.; and Cork, Ireland, and
sales offices in Canada, the U.S., the U.K. and Asia. The Company's shares are
listed on The Toronto Stock Exchange (TSX: VRS). The web site is www.allen-
vanguard.com.
This press release may contain forward-looking statements relating to,
among other things, the Company's expectations concerning future product
demand and growth opportunities and customer acceptance of Company's products.
These forward-looking statements are neither promises nor guarantees, but
involve risks and uncertainties that may cause actual results to differ
materially from those in the forward-looking statements. The Company disclaims
any obligation to publicly update or revise any such statements. The Toronto
Stock Exchange has neither approved nor disapproved the contents of this press
release.
To find out more about Allen-Vanguard Corporation, visit our website at
www.allen-vanguard.com.
%SEDAR: 00018026E
